One-Hit Wonders

Prince Lobel’s “To-Do” List for CAURD Licensees Prior to Commencing Operation

Published

2 years ago

February 22, 2023

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Becoming the recipient of a coveted CAURD license is an extraordinary opportunity that can bring joy and excitement to Justice-Involved individuals who have been impacted by the previous criminalization of cannabis. It can also leave new licensees wondering what steps to take next.

In an effort to help CAURD licensees commence their operations, the Prince Lobel Cannabis Team has put together a description of six issues that every CAURD licensee should address in order to successfully and efficiently launch an adult-use retail dispensary.

1. Commercial Contracts

Commercial contracts are an integral part of any business and are crucial to a successful CAURD launch. Unfortunately, they can also be complicated and confusing. CAURD licensees will be required to enter numerous contracts before commencing operation, potentially including a potential Pop-Up License, Lease Agreement, Labor Peace Agreement, Vendor Contracts, and Website Design Agreements.

CAURD licensees choosing to accept a retail location provided by the Dormitory Authority of the State of New York (DASNY) will be required to execute a lease agreement. The lease agreement must be with an entity affiliated with DASNY, in which the licensee becomes a subtenant of the provided retail location.

CAURD licensees are required to enter a Labor Peace Agreement, a contract between the licensee and labor representatives. Under these agreements, licensee must agree to be neutral during any potential union efforts, while the union organizers agree to not strike or otherwise disrupt the employer’s business operations.

Vendor contracts are also critical. New York State allows CAURD licensees to purchase cannabis and cannabis products from distributors on credit. However, all agreements to purchase cannabis on credit must be reported to the Office of Cannabis Management (OCM) with the terms of payments and credit. The OCM may invalidate any agreement that it deems commercially unreasonable or where it suspects discriminatory pricing practices.

Finally, the New York Social Equity Cannabis Investment Fund (Cannabis Fund) may not be able to finance every purchase that a CAURD license needs to make. Therefore, CAURD licensees may need to enter financing agreement with third parties in order to raise necessary working capital for their dispensary.

Lending agreements and other financial contracts involving cannabis, which remains federally illegal, are highly specialized and require specific disclosures. Basic forms found online likely will not adequately protect CAURD licensees’ interests when entering credit agreements. Prince Lobel’s attorneys can review CAURD licensees’ commercial contracts and lease agreements as well as help them draft lending agreements and other financial documents.

2. Executive Recruitment & Compensation

Employees are the backbone of every company. CAURD licensees will need to build a competent team of experienced individuals to be successful in the cannabis industry. CAURD licensees should develop an organizational chart that outlines key C-suite Executives (i.e., chief executive officer, chief operating officer, chief financial officer, etc.) as well as a staffing plan that designates critical management staff (i.e., general manager, floor manager, inventory intake manager, etc.) and other retail floor employees (i.e., bud tenders, cashiers, greeters, etc.). CAURD licensees should begin considering how to fill these essential roles and the appropriate compensation and benefit packages for each position.

Further, CAURD licensees should familiarize themselves with New York State labor law, including unemployment insurance obligations, day of rest and meal period requirements, mandatory paid periods, and overtime compensation rules.

Prince Lobel Strategic Advisors can help pair CAURD licensees with experienced cannabis industry executives to help fill their C-suite. Further, Prince Lobel’s attorneys can assist CAURD licensees with drafting executive compensation packages and employment contracts as well as non-compete and non-disclosure agreements. Prince Lobel can also help provide trainings on how to remain compliant with the nuances of NYS labor law.

3. Employee Training Manual

CAURD licensees are responsible for the actions of their employees, as any violation committed by an employee within the scope of their employment is considered a violation committed by the licensee. Thus, every CAURD licensee must ensure that their employees possess the necessary education and training to perform their duties in compliance with New York law, regulation, and guidance.

CAURD licensees are required to train all employees within 30 days of being hired. The employee training comprises a minimum curriculum involving subjects ranging from the history of cannabis use, prohibition, and legalization, to compliance with and operation of inventory tracking systems. Further, every CAURD licensee must maintain a written Employee Training Manual covering such topics as worker guidelines and security, operating and safety procedures, and information about the types of cannabis products that the dispensary sells.

While there is no shortage of top-notch talent coming from out of state, the legacy market, and other educational and mentorship programs, the overall success of any dispensary will come from the quality and comprehensive scope of the licensees’ Employee Training Manual and employee training.

Prince Lobel’s attorneys can help CAURD licensees draft an Employee Training Manual that is compliant with the Office of Cannabis Management’s (OCM) regulations and guidance and particular to the unique needs of their business and staff.

4. Standard Operating Procedures

Standard Operating Procedures (SOPs) are the vital organs to every cannabis dispensary. SOPs essentially cover every operational course of action that occurs in a dispensary, ranging from opening and closing procedures to inventory and quarantine procedures.

While numerous cookie-cutter SOPs can be found online, CAURD licensees should make sure that their SOPs are compliant with New York law, regulations, and guidance. An SOP must also be tailored to the site plan of the licensed premises and the needs of the licensee’s business to ensure that the dispensary runs smoothly and effectively.

Prince Lobel’s attorneys can assist CAURD licensees with drafting and reviewing a site-specific and legally compliant SOP.

5. Intellectual Property Protection

Successful branding and marketing are key components for any company, especially in a highly competitive market like cannabis. A CAURD licensee must ensure that its most valuable asset—intellectual property (IP)—is protected.

Intellectual property encompasses everything from a company’s patents and trademarks to its copyrights and trade secrets, including its business name, logos, designs, mottos, and website domains. Consequently, the merit of CAURD licensees’ intellectual property and the strength of their IP protection will have a significant effect on the value and success of their businesses. CAURD licensees should ensure that their IP and brands are adequately protected.

Prince Lobel’s attorneys can make sure that licensees’ business names and branding do not infringe on registered marks in order to avoid unwarranted and costly cease and desist actions. Further, our team of IP attorneys can help CAURD licensees register their business name, logos, designs, mottos, and website domains for New York State trademark protection to ensure that their IP is protected from unauthorized uses and infringements.

6. Marketing and Advertising Regulations

Marketing and advertising go hand-in-hand with a company’s IP and are crucial to the success of any company. While the purpose of every company’s marketing team is to exercise its creative skill and artist expertise to increase brand likeness and awareness, New York regulators have established strict rules regarding the marketing and advertising of cannabis businesses that significantly limit how licensees can engage consumers.

New York State’s cannabis marketing and advertising rules impose rigorous regulation on the time, place, and manner of cannabis advertisements, including required warnings and support services information, interior signage requirements, and restrictions on exterior signage, as well as prohibitions on making any health claims, using commercial mascots, passing out handbills, and advertising at sporting venues, video game arcades, shopping malls, and fairs that receive state allocations.

CAURD licensees and their marketing teams should become familiar with all state law, regulation, and guidance related to the marketing and advertising of adult-use cannabis businesses and/or consult experienced legal counsel to ensure compliance with all marketing and advertising rules.

Prince Lobel’s attorneys can review CAURD licensees’ marketing materials to ensure that they contain all necessary warnings and are compliant with law, regulation, and guidance. Additionally, Prince Lobel can provide training on these subjects for CAURD licensees and their marketing teams.

Prince Lobel Tye LLP, with offices in Boston and New York, has helped hundreds of cannabis establishments across New England commence operations, including the first medical cannabis dispensary in Boston and the first adult-use retail dispensary in Massachusetts, and recently played a key role in the launch of Smacked LLC – New York’s first Justice-Involved and for-profit adult-use retail dispensary.

Prince Lobel’s attorneys look forward to helping more CAURD licensees successfully launch their dispensaries in the near future. If you need assistance commencing operation of your Conditional Adult-use Retail Dispensary, please feel free to reach out to these members of our experienced Cannabis Team:

For CAURD questions: David C. Holland, James K. Landau, or Andrew Schriever

For Commercial Contracts and Financing: John Bradley, Max Riffin, or Douglas Trokie

For Executive Recruitment & Compensation: John Bradley, James K. Landau, Andrew Schriever, or David C. Holland

For New York Employee Training Manual: David C. Holland, James K. Landau, or Andrew Schriever

For Standard Operating Procedures: David C. Holland, James K. Landau, or Andrew Schriever

With thanks to Dalton Battin for his assistance on this alert.

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One-Hit Wonders

Kentucky Bills Would Tax and Strictly Regulate Hemp-Infused THC Beverages Like Alcohol

Published

1 month ago

March 19, 2025

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In the years since the 2018 Farm Bill became federal law, a burgeoning industry of hemp-infused THC beverages has proliferated throughout the country, including in Kentucky. The 2018 Farm Bill legalized the domestic production of hemp and protected hemp and hemp products in interstate commerce. Likewise, Kentucky law has—for years—broadly allowed retail sales of hemp products, including food and beverages with hemp-derived THC.

Some states, however, perceive the 2018 Farm Bill to have created a legal loophole that allows hemp products with intoxicating amounts of THC to be sold, despite the 2018 Farm Bill’s restriction that hemp may not contain more than 0.3% delta-9 THC on a dry weight basis. To close the loophole, states have enacted laws or implemented regulations banning certain hemp products with intoxicating amounts of THC or restricting such products to adult-use channels like licensed alcohol stores or cannabis dispensaries.

Kentucky appeared poised to do the same when state Senator Julie Raque Adams introduced Senate Bill (SB) 202, which would have placed a one-year moratorium on the sale of hemp-infused THC beverages while the state developed a regulatory regime. Hemp beverage manufacturers and other hemp industry stakeholders loudly and quickly voiced opposition, arguing for narrower means than banning all sales. The next day, Senator Adams filed a floor amendment that removed the moratorium and instead imposed the three-tiered regulatory system that exists for alcohol.

The three-tiered regulatory system that will apply if the bill becomes law has robust requirements, including licensing, shipping, and signature-on-delivery requirements. Additionally, hemp beverages will be limited to five milligrams of intoxicating cannabinoids per serving and may only be sold or consumed by persons 21 years of age or older. Beverages that exceed the cannabinoid limit could be legally sold until May 1, 2025.

The Senate approved the floor amendment. The House passed a committee substitute retaining the Senate floor amendment’s provisions but that extends the sell-through provision until June 1, 2025, and makes the five-milligram per serving limit applicable per every 12-ounce serving. The House committee substitute allows hemp beverages to be sold at fairs, festivals, and similar events. The Senate concurred with the House’s version, and Governor Beshear received the bill to sign into law or veto.

Although SB 202 eschews a ban against hemp-infused THC beverages, it creates strict regulations that differ significantly from the current regulatory regime for hemp beverages, while also directing state agencies to develop further regulations. Ongoing compliance by manufacturers, distributors, and retailers will be critical.

In addition to SB 202, the House and Senate passed House Bill (HB) 775, which sets tax rates for hemp-infused THC beverages. The taxes must be paid and reported by both manufacturers and distributors. Among other provisions, the bill requires manufacturers to obtain a food manufacturer permit from the Department for Public Health and to register with the Department of Revenue, and requires sellers to obtain a retail package, distributor, or direct shipper license. HB 775 is headed to Governor Beshear’s desk.

As a nationally preeminent and leading firm for hemp legal and regulatory services, Frost Brown Todd is well positioned to assist hemp manufacturers, distributors, and retailers in navigating applicable federal and state laws. For more information about SB 202 or HB 775, or their implications for hemp beverages sold in Kentucky, please contact the author or any other attorney with Frost Brown Todd’s Consumable Goods Team.

You can also visit our Hemp Legally Speaking Blog for more insight into the legal and operational issues unique to the industrial hemp, CBD, and hemp-derived THC marketplaces.

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One-Hit Wonders

State Cannabis Banking Laws: Where Equity & Lending Access Stand Today – Eric Foster

Published

1 month ago

March 13, 2025

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By Eric Foster |

Cannas Capital Holdings

The Patchwork of State Cannabis Banking Laws

As federal cannabis banking reform remains stalled, states have begun taking independent action to address the capital access crisis for cannabis businesses. While some states like Illinois, Maryland, New York, and Virginia have created state-backed cannabis lending programs, others have taken different approaches, ranging from self-administered programs with no external banking involvement to state protections for financial institutions but no direct state capital support. This mishmash of approaches leaves both Social Equity Cannabis businesses vulnerable to predatory lenders and financial instability and Corporate Cannabis businesses without debt-financed lending options.

This article breaks down state cannabis banking laws, highlighting:

Which states provide structured lending and financing support.
How different states approach social equity financing.
Key differences in state banking statutes and what needs improvement.

1. How States Approach Cannabis Banking & Lending

Since federal banks and credit unions remain hesitant to lend, state governments have adopted various models to facilitate financial access for cannabis licensees.

Four Common Models of State Cannabis Banking & Lending

✅ Model 1: State-Backed Cannabis Lending Programs (Best Practice) These states use cannabis tax revenue to fund capital access programs, creating low-interest or zero-interest loan funds and encouraging banks to participate through loan guarantees and risk-sharing mechanisms.

Examples: Illinois, Maryland, New York, Virginia
Best for: Social equity and minority-owned cannabis businesses needing fair access to financing.

✅ Model 2: State Self-Administered Loan & Grant Programs Without External Bank Partnerships Some states allocate funding for social equity applicants but do not involve external banks, credit unions, or CDFIs in the process. These programs:

Provide a limited total amount of funding per year, which must be replenished through annual appropriations.
Cap the maximum funding available per business.
Do not address the need for long-term lending partnerships that could expand financing options.
Examples: Connecticut, Michigan, Massachusetts, Colorado, New Jersey, New York
Best for: Short-term relief but not a scalable lending solution for long-term business growth.

✅ Model 3: State Legal Protections for Banks Without Direct State Capital Support These states allow banks, credit unions, and CDFIs to serve cannabis businesses without fear of state-level penalties, but they do not provide direct state financial backing for loans or banking relationships. As a result:

Banks must still manage all compliance risks independently, limiting participation.
No state-backed loan guarantees, lending facilities, or grant programs exist to make cannabis lending more attractive.
Only the most risk-tolerant financial institutions choose to engage with cannabis businesses.
Examples: California, Pennsylvania, Arkansas, Rhode Island, Texas, Oklahoma, West Virginia, Ohio, Missouri, South Dakota
Best for: Encouraging some legal banking relationships but fails to ensure broad financial access for cannabis businesses.

✅ Model 4: No State-Level Banking Protections for Cannabis Businesses Some states have legalized cannabis but have not enacted statutory protections for banks or credit unions working with marijuana-related businesses. As a result:

Financial institutions in these states face higher risks when serving cannabis businesses.
No clear legal framework exists to shield banks from potential enforcement actions.
Cannabis businesses in these states remain almost entirely cash-based, increasing security risks and limiting growth.
Example: Louisiana
Worst for: Any cannabis business seeking financial services.

2. State-by-State Breakdown of Cannabis Banking & Lending Programs

Illinois: The Gold Standard for State Cannabis Lending

Best for: Social Equity & Minority-Owned Cannabis Businesses Banking Model: State-Backed Lending & Capital Access Program

The Community Invest – Cannabis Banking Services Program provides state-backed capital to banks and credit unions, enabling them to offer low-cost banking services to cannabis businesses.
The Cannabis Social Equity Loan Program offers low- or no-interest loans to social equity applicants, helping minority businesses establish themselves in the market.

The Illinois Finance Authority administers state-funded loans and subsidizes loans through qualified Banks, Credit Unions and CDFI’s, prioritizing businesses in disproportionately impacted areas.

Maryland: A Strong Model with Loan Loss Reserve Protection

Best for: Small & Medium-Scale Cannabis Businesses Banking Model: State Loan Loss Reserve & Lending Program

Maryland’s Capital Access Program (Subtitle 14, Chapter 26 of 2022) provides loan loss reserve accounts for banks that lend to social equity cannabis businesses.
The state allows dispensaries to apply for loans up to $500,000 and growers/processors up to $1 million, reducing financial barriers.
Maryland’s cannabis tax revenue partially funds these lending programs, ensuring sustainability.

New York: Social Equity-Focused Cannabis Lending

Best for: Justice-Impacted & Minority Entrepreneurs Banking Model: State-Facilitated Loan Fund & Private Investment Pool

New York’s Social Equity Cannabis Fund is structured to provide financial backing to social equity licensees.
The state works with private financial institutions and impact investors to co-fund cannabis business loans.
Loan repayment structures are designed to minimize early financial strain, helping startups succeed.

Virginia: A Developing State Banking Model

Best for: New Market Entrants & Small-Scale Cannabis Businesses Banking Model: State-Led Lending Initiative

Virginia’s State Cannabis Lending Initiative is has not started due to obstruction from Governor Youngkin rejecting the second State legalization bill in 2024 and 2025 but is modeled after Illinois & Maryland.
The state intends to offer cannabis business loans backed by state funds both directly and through Community Development Financial Institutions and Banks, supporting social equity businesses.

3. Where Other States Are Falling Short

Model 2 States: Self-Administered, Limited Loan & Grant Programs

Connecticut, Michigan, Massachusetts, Colorado and New Jersey provide funding for cannabis businesses but do not involve financial institutions, creating short-term solutions but no long-term lending structures.

Colorado self administers their lending program through the Office of Economic Development & International Trade

Model 3 States: State Protections Without Capital Support

California, Pennsylvania, Arkansas, Rhode Island, Texas, Oklahoma, West Virginia, Ohio, Missouri, South Dakota have legal protections for banks working with cannabis businesses but no direct lending or grant programs.

Model 4 States: No Legal Banking Protections

Louisiana has no banking protections for financial institutions, making cannabis businesses in the state almost entirely cash based.

4. The Path Forward: Expanding State-Level Lending Programs

As more states legalize cannabis, the best way to ensure equitable access to capital is to create structured lending programs that involve banks, credit unions, and CDFIs. States that only provide self-administered grants or legal protections for banks are not doing enough to ensure sustainable cannabis financing.

By following the models set by Illinois and Maryland, states can:

✅ Create state-backed cannabis lending facilities using cannabis tax revenues.

✅ Offer loan guarantees to banks and credit unions to reduce lending risks.

The Illinois Cannabis Capital Investment eco-system

✅ Adopt compliance & underwriting frameworks like the Bank Black Initiative & Cannabis Compliance Banking Solution to support financial institutions.

How Bank Black & Cannabis Compliance Banking Can Help

Cannas Capital’s Bank Black Initiative and Cannabis Compliance Banking & Capital Solution offer: ✅ AI-driven underwriting to de-risk cannabis loans. ✅ Regulatory compliance monitoring for banks & state agencies. ✅ Social equity-focused lending frameworks to ensure minority-owned businesses have fair access to capital.

Final Thoughts: Why State-Led Action is Necessary

The federal government isn’t moving on cannabis banking reform anytime soon. That means states must take the lead in creating sustainable, scalable lending programs for cannabis businesses. Expanding access to capital is not just about financing cannabis businesses—it’s about ensuring that social equity applicants and minority-owned companies have the same opportunities to succeed as well-capitalized corporate players.

With models like Illinois, Maryland, and New York, we already see effective solutions that prioritize social equity financing. The next step is expanding these programs to more states—and integrating compliance-driven solutions like the Bank Black Initiative to make them even stronger.

Citations & Key References

Source

Key Information Referenced

Link or Document

Illinois Finance Authority Act (20 ILCS 3501/801-5)

Illinois state-backed cannabis banking program

Illinois Finance Authority Act

Maryland Chapter 26 of 2022 & Chapter 254/255 of 2023

Maryland’s cannabis loan loss reserve and capital access program

Chapter 254/255 of 2023

New York Social Equity Cannabis Fund

State-backed cannabis investment fund